Estee Lauder Earnings: Sharper Focus on Innovation and Consumer Outreach Prudent but Will Take Time

We are putting Estee Lauder under review and plan to cut our fair value estimate by roughly 20%. Shares of the wide-moat beauty product maker fell 16% on Feb. 4 after the firm issued sobering third-quarter guidance calling for adjusted earnings per share to plunge between 69% to 79% on an 8%-10% organic sales decline. Given management comments on persistent demand headwinds in China and Asia travel retail, an expanded restructuring that will likely delay cost-saving benefits to fiscal 2027, and significant investment needs in innovation and consumer engagement, we think our projections for the coming years are no longer achievable.